Mexico Signs the ICSID Convention that Protects Foreign Investors

January 12, 2018

On January 11, 2018, the International Centre for Settlement of Investment Disputes (ICSID) of the World Bank in Washington D.C. announced that the United Mexican States' Secretary of the Economy, Ildefonso Guajardo Villarreal, had signed the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention). The next step is that Mexico must ratify the ICSID Convention before it goes into force as to Mexico.

The ICSID Convention went into force in 1966. It established ICSID as an arbitration body for resolution of investment treaty disputes. Investment treaties are intended to facilitate and protect foreign investment amongst countries. ICSID is intended to provide a neutral forum for conciliation and arbitration of such disputes

For a foreign investor, investment treaty considerations apply at different stages, including:

when deciding whether to make an investment in, do business in, or contract with a foreign state;

when selecting the vehicle (and its nationality) for the investment, business or contract;

when negotiating with foreign states and their regulatory bodies;

when an investor has been subjected to expropriation, discriminatory measures, changes in laws, or any other adverse actions by a foreign state; and

when considering and undertaking legal actions, including prosecuting investment treaty arbitration claims, against a foreign state.

Another multilateral treaty that provides investment treaty protection which Mexico has ratified is the North American Free Trade Agreement (NAFTA). According to the United Nations Conference on Trade and Development (UNCTAD), Mexico also has ratified 29 bilateral investment treaties with similar protection. However, NAFTA is regional in scope and bilateral investment treaties apply only between two states.

The ICSID Convention has been ratified by 153 countries, including the United States. Among the larger economies, Brazil, South Africa and India have not ratified the ICSID Convention.

For further information on how this development may affect you, please contact Juan C. Basombrio, Partner, Dorsey & Whitney LLP, basombrio.juandorsey.com.